The company is already making some important moves to get back on track.
Starbucks (SBUX 1.65%) shareholders have had some nail-biting moments over the past few years as the company went through several CEOs and tried to adapt to changing trends. They breathed a sigh of relief with the surprise announcement that the company had snagged Brian Niccol from Chipotle Mexican Grill, and now they can breathe even easier after some new updates.
If you aren’t a shareholder yet, now would be a great time to make the jump.
Niccol is making his mark
Niccol didn’t waste any time when getting into the ring. He provided an update on where he wants to take Starbucks after his first week on the job, promising to bring the company back to its roots as a premium coffeehouse where people gather. He’s focusing on empowering baristas to get it right, deliver customer drinks on time, and tell Starbucks’ story.
Niccol is a wiz at these kinds of things, already proving his mettle through stints at Yum! Brands’ Taco Bell and then again turning around Chipotle. He established clear processes leaning into digital, and perhaps most importantly, he crafted a clear and cogent brand identity that appeals to customers. Chipotle stock gained 870% from the time Niccol took over in 2017 until he left.
Just a month into his new role, that’s already becoming clear at Starbucks. In the initial update, Niccol spent most of his letter detailing Starbucks’ commitment to high-quality, handcrafted coffee from the farm to the store. He reminded readers that Starbucks purchased its own Costa Rica-based coffee farm, which it uses to innovate, and that its goal is caring for stakeholders across the spectrum, starting with local farmers.
The latest Starbucks update
Niccol moves quickly and boldly. According to The Wall Street Journal, he said, “The strategy is, simply put, just making a couple powerful choices, and then we’ve got to execute like crazy,” in an internal company forum.
To that end, Starbucks recently announced that it’s acquiring two new coffee farms in Guatemala and Costa Rica. It plans to use these assets to innovate in coffee production and sustainability, and it has future goals of acquiring farms in Africa and Asia.
Starbucks already has 10 farmer support centers and 70 “model farms” in its supply chain, and this drives Starbucks further in that direction.
Where Starbucks is going
This is directly linked to telling Starbucks’ story and crafting its premium image. It’s strongly reminiscent of how Niccol built Chipotle’s brand as selling fresh and healthy premium food at a fair price.
As expensive as Starbucks is compared to its peers, it still sells coffee, which doesn’t break most customers’ banks. Its challenge these past few years has been to make the Starbucks cup worth the price. Niccol is taking the challenge head on and meeting it with a clear brand identity, honing in on the eco-friendly, farm-to-table story.
The company isn’t waiting to bring this forward. According to The Wall Street Journal report, it’s scaling back promotions meant to get more people in the door and plans instead to drive traffic in the holiday season through seasonal innovation and advertising. Coupled with the new farm initiative, the story is already being told.
Where Starbucks stock is going
Starbucks stock soared 24% on the news that Niccol was coming on board, and it’s remained there as investors anticipate results. So far, Niccol is doing what he does best, making the necessary moves to get back on track.
This coincides with what appears to be moderating inflation, which should help his cause. Starbucks is well positioned to bounce back, and investors can expect the results to show up in Starbucks’ financials soon. The stock should follow quickly.
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: short December 2024 $54 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
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Publish date : 2024-10-18 20:57:00
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